Free Essay Example on Strategic Insights: Unveiling the Power of Company Analysis Tools

Company Analysis Tools

The Company Analysis tools include McKinsey 7s Framework, BSC Framework, SWOT analysis, and PESTLE analysis. McKinsey 7s Framework focuses on skills, staff, style, shared values, systems, structure, and strategy, while BSC Framework on finance, clients, business operations, and learning and growth. SWOT analysis stands for the strengths, weaknesses, opportunities, and threats in an organization’s operating environment while PESTLE for political, economic, social, technological, legal, and environmental factors. The following shows the company analysis tools, their advantages and disadvantages.

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McKinsey 7s Framework

The McKinsey 7s Framework provides an analysis of the design of the organization through skills, staff, style, shared values, systems, structure, and strategy (Channon & Caldart 2015). It establishes whether they are influential in taking the organization towards its goals. It focuses on human resources instead of equipment, infrastructure, and capital, which are the common tangibles. When the seven values in the McKinsey 7s model align, an organization becomes more effective in its operations (Demir & Kocaoglu 2019). The values are also interconnected; therefore, an alteration in one part means that other values also need to change.

McKinsey's 7s model has several functions as follows. It facilitates organizational merges and identification of sections in an organization to change at a later time. It is useful for the implementation of new tactics or strategies in an organization; therefore, it facilitates change. The seven factors in the McKinsey 7s model are either soft or hard (Ravanfar 2015). The soft ones are shared values, skills, staff, and style, while the hard factors are strategy, structure, and systems (Shaqrah 2018). The soft factors are challenging to manage, but they form a strong foundation for competitive advantage in an organization. The hard elements are more comfortable to operate, and identifying them is not a challenge.

Strategy refers to the tactic or plan that an organization creates to be successful and competitive against its rivals in the market (Shaqrah 2018). A suitable approach is long-term, straightforward, and has concrete values, mission, and vision. The structure is the method by which an organization divides and organizes its units for accountability. Systems show how a company usually operates through procedures and processes (Shaqrah 2018). Skills are the employees’ abilities for their work at the organization. Staff is the scope of employees, including rewards, training, motivation, and recruitment. Style is how the organization controls the team and operations through managers. Shared values are the standards that employees in an organization maintain for optimum performance (Shaqrah 2018).

The McKinsey 7s model has its advantages and disadvantages as follows. One advantage is that it guides an organization towards change (Ravanfar 2015). It makes it easy to understand and diagnose the operations in an organization. Because of the interconnection between the seven areas, an organization has to focus on all parts. However, it brings a demerit as changing one part will require changing all the others (Demir & Kocaoglu 2019). Also, it does not recognize the differences that occur with changes in the organization. The McKinsey 7s model is also notorious for failure.

SWOT Analysis

SWOT is an abbreviation for strengths, weaknesses, opportunities, and threats (Abdel-Basset et al. 2018). It is useful to understand how an organization stands against its competitors and to create a strategic plan to counter the issue. A SWOT analysis focuses on external and internal factors, while also considering the potential of the organization in the future. A SWOT analysis, therefore, should be data-driven, fact-based, and realistic in all sections of the process (Abdel-Basset et al. 2018). Accuracy is vital; hence, an organization should only consider real-life contexts and no gray areas or beliefs.

The strengths are what make an organization competitive in the market through factors such as technology, financial documents, customer loyalty, and brand development (Cayir Ervural et al. 2018). They can also include the effectiveness of management, location, and infrastructure of the company. The weaknesses are those factors that deter the company from moving in a positive direction; therefore, an organization should seek improvement on the same. Examples of liabilities include a lack of capital, a low supply chain, unsustainable debt and turnover, and a lousy brand (Cayir Ervural et al. 2018). A company can have weak marketing, less awareness of customer attraction, and a narrow focus. The opportunities are factors that an organization can take advantage of to get more competitive. Examples of opportunities include diversification into new markets and identification of promising market segments. The threats are those factors that are a risk to the operations and competitive advantage of an organization. Examples of hazards include limited labor supply, increasing competition, and rising costs of raw materials (Cayir Ervural et al. 2018). They can also include entrance to the target market by major play, a price-sensitive market, and a slow economy.

SWOT analysis has its advantages as follows. The four-step study makes it easier to understand an organization from a broader view (Gürel 2017). It is because it identifies the threats, and a company can address the weaknesses swiftly. Through the opportunities identified, an organization can grab them and capitalize on gaining more competitive advantage. An organization can also make the most of its strengths by developing more strategies and goals that align to take the company forward (Gürel 2017). The disadvantages of SWOT analysis are as follows. SWOT analysis does not address the critical issues affecting an organization. It only provides an overview of four sections in a company’s operations. SWOT analysis does not give decisions or solutions that a company should take in the identification of weaknesses and threats (Phadermrod et al. 2019). The opportunities section may have many ideas without a way forward on the best route to take or the strategy to implement (Phadermrod et al. 2019). A SWOT analysis, therefore, provides a company with loads of information, but they are not entirely useful.

BSC (Balanced Scorecard) Analysis

It is a form of analysis that seeks to improve and track the performance of business operations and its outcomes through strategic management (Kaufman et al. 2019). It is essential to an organization as it gives them feedback on the business processes. Balanced Scorecard analysis requires comprehensive data collection for interpretation. With the result of the investigation, the organization can make sound decisions on the business processes and other relevant resources (Olson & Wu 2020).

The balanced scorecard analysis focuses on four areas, including finance, clients, business operations, and learning and growth, which promote acceptable standards and norms around the organization for the realization of the company’s objectives (Olson & Wu 2020). Finance refers to the organization’s income, expenditure, and sales to understand performance in the area, customer perspectives on product or service availability, price and quality, and overall satisfaction. Business processes are the operations that make up the company from management to the lowest level.

With the four factors, a balanced scorecard is essential in developing goals, initiatives, measurements, and objectives in an organization (Kaufman et al. 2019). They make it simple for the identify of factors that deter the performance of the business. An organization can then create strategies to counter these problems. Through objectives, the Balanced Scorecard analysis provides an overview of the whole company (Supino et al. 2019). Therefore, an organization can identify specific points in the company for value addition. The Balanced Scorecard analysis, therefore, can be useful to create objectives and initiatives for an organization.

The Balanced Scorecard has its advantages and disadvantages. It creates direction for the business strategy. It is because in an organization, departments may have different ways of setting their goals and objectives, and the Balanced Scorecard is essential for unification (Supino et al. 2019). As the purposes of the organization align, communication around the place gets better. The alignment of goals and objectives is vital to promote accountability as every employee understands their role in the project. Therefore, it also enables the development of individual careers because departmental goals often align with personal objectives.

Disadvantages of the Balanced Scorecard include the following. A Balanced Scorecard of one organization may not work in another (Terziev & Stoyanov 2017). Therefore, it requires formulation from the bottom going up. The leaders of the organization have to align with the project in place for the Balanced Scorecard to be successful. It is because the implementation of the majority of suggestions from the analysis may bring a lot of changes which may not be welcome by all. The Balanced Scorecard is data-intensive because the analysis process requires much reporting (Terziev & Stoyanov 2017). It may be tedious for employees, and factors like fatigue may hinder business operations and the quest toward the organization’s goals. The Balanced Scorecard provides several advantages to a company, but it is necessary to evaluate if it fits the direction that the company wants to go.

PESTLE Analysis

PESTLE analysis stands for political, economic, social, technological, legal, and environmental factors (Islam & Mamun 2017). They are useful for an organization to analyze the environment in which it operates. Political factors result from a government, therefore affecting the industry or the economy in which a company works. An example is when a government introduces a duty or tax that can affect the financials of an organization (Islam & Mamun 2017). Examples of political factors include trade tariffs, fiscal policy, and tax policies. Economic factors are the changes that can occur in an economy (Novianti 2018). An example is an inflation rate, which may alter the way an organization creates or distributes products and services and also affects the purchasing patterns of clients (Islam & Mamun 2017). Other examples include economic growth, foreign exchange rates, and interest rates.

Social factors include population analytics, demographics, and cultural trends (Walsh et al. 2019). They affect the social environment in which a company operates. Technological factors include the creation in technology that may alter how an organization operates in the market (Racz et al. 2018). Legal aspects are laws that govern the business environment, either in an economic block, in a country or both. Examples include labor laws, safety standards, and consumer laws (Walsh et al. 2019). Environmental factors are those that affect the natural environment that an organization operates, and it is more sensitive to specific industries like agriculture and tourism (Walsh et al. 2019).

PESTLE Analysis has its advantages and disadvantages. Its benefits include the following. It is cost-effective, and it only requires time since it involves the identification of the critical points in all the factors (Racz et al. 2018). It provides insight into the environment in which an organization operates. PESTLE analysis can be essential for specific business aspects like customer relationships or marketing plans (Racz et al. 2018).